Event: brother Technology released its quarterly report in 2010. during the reporting period, the company realized operating income of 458 million yuan (year-on-year + 47.0%, month-on-month + 27.5%) and net profit of 20 million yuan (- 19.3% compared with the same period last year;-25 million yuan for the same period last year). Achieve non-return net profit of 19 million yuan (compared with the same period last year + 35.2%; the same period last year-33 million yuan).
Comments: brother Technology 2020Q1 performance increased significantly compared with the previous month, in line with the previous forecast; we analyze that in addition to the CISA table, it is mainly caused by the rising price of vitamin products and other factors.
CISA may contribute to the performance of Q1, and Q2 is uncertain due to the suspension of production due to the epidemic. It is announced that the official delivery of the brother CISA in January 2020 has been completed, but due to the impact of the epidemic, the formal "financial evaluation report" has not yet been issued. The quarterly report is based on the "forecast sheet" and may be adjusted later. Based on CISA's audited financial statements, its 2019H1 realized revenue of 585 million rand (at that time the exchange rate was equivalent to approximately 280 million yuan) and net profit of 0.39 billion rand (equivalent to about 19 million yuan at that time exchange rate), we speculate that the CISA consolidated statement of 2020Q1 may have a certain contribution to the company's performance. However, according to the company announcement, CISA production has been suspended since March 26 due to the impact of the epidemic (South Africa is now expected to contact the blockade in early May), so the Q2 situation is uncertain.
The increase in the price of vitamin products has a positive or obvious contribution to Q1, and Q2 may be sustainable.
According to Boya and Hexun's analysis, Q1 purchased a large number of goods because foreign users were worried about logistics delays in China / India and other places during the epidemic prevention and control period; among them, the supply of raw materials for products such as VB3 and VK3 was also tight, and there were also a large number of loss-making enterprises in the early stage of VB3 and other products, and many factors pushed up the price of vitamin products.
According to Boya and Hexun, the average market prices and changes of the four vitamins mainly sold by 2020Q1 are as follows: the average price of VK3 is 74 yuan / kg (year-on-year-0.6%, month-on-month + 15.3%), VB1 average price is 246 yuan / kg (year-on-year + 35.2%, month-on-month + 51.4%), VB3 average price is 49 yuan / kg (year-on-year + 33.3%, month-on-month + 9.6%), VB5 average price is 376yuan / kg (year-on-year + 107.3%, month-on-month + 1.6%). On the other hand, the average market price of VK3/VB1/VB3/VB5 in April has increased by 28%, 8%, 2%, 17%, compared with the average price of Q1, so we analyze the contribution of vitamin price increase to Q2 or have a certain degree of sustainability.
Brother vitamin Q1 overhaul brings an increase in management costs, resumption of production at the end of the quarter or a contribution to Q2 performance repair. According to the announcement, the company's subsidiary brother vitamins will carry out renovation and upgrading work from September 2019, which leads to the company's 2020Q1 management expenses of + 107% and + 56% compared with the same period last year due to the increase in production costs. According to the announcement, on March 13, 2020, the Yancheng Municipal Government issued a reply for resumption of production, which agreed in principle to the resumption of production of the Brother Vitamin Company's annual production of 3200 tons of vitamin B1 project, 1000 tons of β-aminopropionic acid project and related supporting facilities. it is expected to form the performance repair contribution of Q2.
Jiangxi base is the focus of the company's capital expenditure, the future stock projects continue to release (VB3/VB5), incremental projects continue to build (iodine contrast agent / hydroquinone series may gradually form income before and after 2020Q2, followed by the new VB3, turpentine deep processing industry chain), it is expected to promote sustained performance growth.
According to the announcement, 5000 tons of VB5, 13000 tons of VB3 and 10,000 tons of 3-cyanopyridine, their intermediates, were gradually put into production and put into production at the end of 2017. according to Boya and Hexun, the brothers produced about 1500 tons of VB5 and 7000 tons of VB3 in 2019, so follow-up sales are expected to continue to increase.
According to the announcement, Jiangxi base 1000 tons of iodine contrast agents and intermediates, 20,000 tons of hydroquinone, 31100 tons of hydroquinone derivatives (including vanillin, ethyl vanillin, p-hydroxyanisole, etc.) phase I project will begin trial production at the end of 2019, is expected to gradually contribute income before and after 2020Q2, the net profit is expected to reach 220 million yuan.
In April 2020, the company announced that it plans to raise 290 million yuan to build 13000 tons of VB3 (including 8000 tons of nicotinamide, 5000 tons of nicotinic acid) and 3000 tons of spices (including 100 tons of dihydrolauryl enol, 2000 tons of turpentine, etc.). The company will enhance the comprehensive competitiveness of products through VB3 technological innovation, and increase the share of VB3 in high-end markets such as cosmetics; speed up the company's entry into the field of turpentine deep processing through turpentine projects, so as to lay a foundation for the development of turpentine deep processing projects.
In April 2020, the company announced that it plans to raise an additional 1.2 billion yuan, of which 890 million is used for 3 tons of natural flavor projects (mainly dihydrolauryl alcohol, terpineol, amberone, camphor, myrcene, isobornyl acetate, etc.) to build a complete turpentine industry chain with a construction period of 3 years, with a projected net profit of 210 million yuan after reaching production, and 80 million yuan for the construction of brother research institutes.
Investment suggestion: buy-An investment rating, we expect the company's net profit from 2020 to 2022 to be 255 million yuan, 336 million yuan and 408 million yuan respectively.
Risk tips: project construction is not as expected, product prices fluctuate, capacity start-up is limited, and so on.